Author Archive

TIPS Have Underforecasted Inflation

Back in 2003, the Treasury began selling 5-year Treasury Inflation Protected Securities, or TIPS. (Longer maturities were available starting in 1997.) What happens is that the government pays a fixed coupon rate, but the principal is adjusted based on increases in the Consumer Price Index (CPI). Thus, TIPS yields are one of the closest things […]

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U.S. Government Decides to Take Over Insurance Sector, Too

While you were sleeping (almost), the feds decide to nationalize one of the world’s largest insurance companies. Apparently Paulson is the kind of guy that buys every property he lands on; it’s just play money, right? What’s another $85 billion among Wall Street friends? Anyway here are the gory details: The precise details of the […]

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A Shout Out to Hampton Bay

I think the incentives are bad for manufacturers to write good instructions, since people have already purchased the product by the time they see the instructions, and more important because you already learned how to put the #)%$#$ thing together (in spite of the awful instructions) the first time. I.e., you would not be deterred […]

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Sarah Palin Sells the Headfake, But Gibson Doesn’t Bite–and Other Sundry Observations

People have analyzed the heck out of Sarah Palin’s response when Charlie Gibson asked if she agreed with the Bush Doctrine. For the record, I agree that it is embarrassing that she didn’t know what it was, especially since foreign policy is her obvious weakness. On the other hand, as somebody who just got butterflies […]

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The Economics of Potty Training

Ah, if I were a tenured academic, the papers I could write… I am struggling with my toddler. For other economist daddies (and mommies), you will appreciate the applications of formal analysis to this topic. You’ve got principal-agent problems requiring payoff rules that are incentive-compatible and overcome seriously asymmetric information. (This latter leads to both […]

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Blood Bath on Wall Street: Buy Gold

Since today has been the worst day for the Dow since the September 11 attacks, I should probably say something. Back in July 2007 I prepared a report for a client (pdf) in which I predicted recession and tough times for the US dollar; you can see op ed treatments here and here. My basic […]

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Fed Injects $70 Billion to Push Down Federal Funds Rate

According to this CNBC article: Federal funds traded in the U.S. interbank lending market slipped to about 4 percent from 6 percent earlier on Monday, after the Federal Reserve added $50 billion of temporary reserves to the banking system in a second overnight repurchase agreement. Earlier on Monday, federal funds surged to 6 percent, well […]

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Murphy on Freddie & Fannie Takeover

In Sunday’s Philadelphia Inquirer, I argue it was not good. A juicy excerpt: If Congress defangs the alternative minimum tax, as it did last year to prevent a large increase on the middle class, the latest Congressional Budget Office forecast projects a record deficit of more than $500 billion for the fiscal year starting Oct. […]

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